Footsie recovers to pre-Lehman collapse level

Britain’s blue chip stocks reached a landmark today as the FTSE 100 Index recovered to the level seen before the collapse of US investment bank Lehman Brothers.

A fifth straight day of gains helped the Footsie close up 35.2 points to 5437.6 - above the close of 5416.7 recorded on the last trading day before Lehman went under in September 2008 and triggered the global financial crisis.

Top UK stocks have enjoyed a rally that began before the Christmas break and is showing no sign of abating amid cautious optimism for the year ahead.

It is the London market’s first day of trading since the Christmas holidays, but a festive surge among other indices open for trading yesterday helped put UK stocks on the front foot.

The Dow Jones Industrial Average on Wall Street and Germany’s Dax both hit fresh highs for the year.

America’s Dow Jones was moving higher again today, with hopes for a seventh consecutive session of US share increases as better readings on home prices and consumer confidence gave trading a boost.

In the UK, recent strong gains have helped the FTSE 100 regain dire losses suffered in the wake of the financial crisis, which at one stage left the blue chip index at a six-year low.

Since slumping to just above 3500 in March, the top tier has made a marked recovery as global economies have begun returning to growth.

Cameron Peacock, market analyst at IG Markets, said the rally reflected heightened volatility caused by low levels of trading and little in the way of corporate or economic news.

He added: “Volumes are expected to be relatively low with many taking an extended break into the New Year so this could add to overall levels of volatility.

“But at least for the time being, the market seems intent on remaining in a bullish mood as the decade draws to a close.”

The FTSE 100 has risen more than 200 points in the last week, with gains today seen across a range of sectors.

Commodity stocks drove the latest improvement in London after dollar weakness helped lift copper prices to a 15-month high and oil prices remained close to $80 a barrel.

Mining stocks were higher, while optimism also spread to the UK property sector, with Liberty International 5% stronger at the top of the Footsie risers board.

British Airways shares were also in the spotlight after the alleged bomb attack on a US plane on Christmas Day.

Shares in US airlines were down by as much as 4% overnight and BA closed down 2% today.

A number of top flight fallers also came from the retail sector as investors took up cautious positions ahead of trading updates due next week.

Next was among those in the red, down by a marginal 0.1%, with Argos and Homebase parent Home Retail Group dropping 1%.

Experts believe equities in general should hold firm in positive territory for the final trading days of 2009.

But there are mixed forecasts for the year ahead. Share Centre chief executive Gavin Oldham believes the looming general election and fall-out from ballooning public spending levels will hold progress back on the FTSE 100.

He predicts a 2010 year-end almost unchanged from this year’s, at 5450.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, is pencilling in a rosier year for UK stocks, with a prediction for a 2010 close at 6000.

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